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Comment by aaronbrethorst | Hacker News Reader

    [T]he bonus was a life raft against personal
    debts racked up while living in San Francisco
    at a below market salary

Never accept a below market salary unless you have serious skin in the game (i.e. founder-level equity). I probably sound like a broken record about this, but you have to assume that your equity in the company will never be worth anything, and—even if you are part of a 'successful' acquisition—you are liable to get an amount that brings you up to parity with the market...if you're willing to accept the golden handcuffs.

Think of your options (or RSUs, or whatever) in a company as being a lottery ticket. Odds are, it won't pay out. If it does, it's likely to be a trivial amount. For the rare cases where things really work out well (early employee at Facebook/Google), please try to remember that you were really lucky.

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Is this advice really on a broken record? I recently saw a pitch from a bank marketing an LP stake in a prominent VC firm, and one of the first slides highlighted the willingness of Silicon Valley engineers to work for below-market rates in exchange for psychological benefits.

How do you know if someone at a party is working for YCombinator startup? Don't worry, he/she will tell you.

The advice is "broken record" and it will be ignored by majority of young engineers. Working for a cool startup is very very cool. Working for big corporation is not cool (and considered evil if that corporation is Microsoft or Oracle).

And that is actually good for economy, for startups, for VCs, and for engineers (not in monetary sense but they will become wiser).

Opinions like this make me happy that I accepted a graduate job at an investment bank (with the hope that I will be able to develop something on the side) instead of going for a startup after finishing university.

One advantage people don't often talk about with finance industry jobs is their incredibly lax moonlighting clauses. Most seem to be of the form, "if we don't trade it and our vendors don't make it, knock yourself out."

That is a far cry from the policy I experienced at MSFT. Doing free reviews on my own time of books being published by Microsoft Press on products I was an engineer on required approval from my VP.

> One advantage people don't often talk about with finance industry jobs is their incredibly lax moonlighting clauses.

Interesting. My first programming job was in a finance company who had a "we own everything you make, here or at home" policy. My manager said most finance companies would rather pay people more than have them working on things outside of work, which I took at face value. Knowing that was how I enjoy learning most, it was a big factor in my leaving.

Maybe it wasn't a trading-focused firm? Most of my friends (and wife) work at firms that are primarily about trading, and it's hard to hire (good) traders if you restrict them from also trading with their own funds on their own time. So, they seem to have the bare minimum policy that satisfies legal regulations about insider information and the contracts they usually have to sign with high-end enterprise vendors.

There's a 'the side' when working at an investment bank? I thought you guys pulled silly-nuts hours and had no spare time. The IB guys I read about constantly lament forgetting that they can't have a social life on weeknights when they get called in at crazy hours to fix up some higher-up's whim.

It's the same as with tech companies. Some people will do crazy hours at some companies, some people won't.

I think it depends on the division you work in. Some guy working in the networks/infra team may get better work/life balance than someone else in the front-office development team. I work in the latter and I must say the hours do suck and you tend to be drained when you get back home after work. But I believe that if you have a strong will and good work ethics you can still manage to work on side projects in the evenings and week-ends. Hard but feasible.

>>Working for a cool startup is very very cool.

No, working for something like Google or Facebook in its start up days is cool. And that is like once in a 15 year opportunity.

In reality you can do a lot of things on the side in a 9-5 job. Than working crazy hours at a crappy start up .

Yes working at big companies is not very much profitable, but neither is working at a bad start up. Bad starts up are worse than big companies.

The cool quotient, in this case, is not governed by the amount of money you make later but by the satisfaction, excitement and thrill of risk associated with working in a startup. Not to forget, more often than not you also tend to learn a lot more in a startup than the usual big corp job.

I often present it this way:

- when you join a company as an engineer, the best case scenario is probably something like 1%.

- a pretty good case scenario would be for a company to be bought in the $100M range. Say, $250M? You'll have cases in the billion-range, but that's exceptional.

So that's $2.5M! Nice! But a couple of things:

- you've been diluted in the meantime. - investors have liquidation preferences, so your percentage is coming out of a smaller amount.

That $2.5M got reduced a bunch. And you'll have to pay taxes on this. So, you're likely under a million in the bank at that point. That's honestly fantastic. But it won't last forever (meaning you're not set for life) and to compare it fairly, you'd want to divide that amount by the number of years you've worked for the company. (compared to a more stable job that pays more, with a regular bonus plan, less hours on the job, probably better benefits, etc.)

But the thing is that in most cases, people don't get 1% and in most cases, companies don't get bought for $250M or more. So, no you most likely won't get rich. Some do (the people at Instagram and Tumblr recently), but they are lucky exceptions. And even then, reports say that most people at Tumblr would get somewhere around $350k. Certainly very nice, but not life-changing and the reason it's been discussed at all, it's because it's an exception.

Yep, totally agree. I like to juxtapose it with the relative likelihood of exits at various orders of magnitude. A $1mm exit seems way easier than a $100mm exit, right?

In the ideal case, how much would you make on that $1mm exit if you were the sole, bootstrapping founder?

How much are you going to make in the ideal case as an employee at the $100mm exit after Series A and B rounds of funding when your initial stake was 1%?

Is it not possible they simply were having trouble finding work elsewhere, or were willing to accept below market salary to work on something cool? Etc?

I know there are certainly folks out there being taken for a ride. But take me for example- I know I personally could find more extravagant wages if I wanted, but I am not optimizing for salary. I am optimizing for happiness, which is what keeps me where I am.

    I am not optimizing for salary. I am optimizing
    for happiness

I'm actually right there with you. But, I don't think this is the case for most people.

Why not both? There is such a thing as a two-parameter optimisation algorithm.

Happiness is the function being maximized, whereas money is just one of several parameters/variables in the equation. It's an important distinction. You can't treat them as two parameters being maximized - for a few rare people, for example, the two are completely inversely related.

But why both? I'm not interested in pissing contests over who has the biggest number. What good does more money do me, if it costs me happiness?

Money is insurance against future unhappiness. Bad things happen for no reason, and you might need money later.

Anything is possible. But at the time Powerset was a high profile startup with a reputation for being engineering driven. The financial crisis hadn't hit either. So it's not really plausible for them to have been hiring engineers who were unable to find any other work.

As for taking a paycut to work on something particularly cool, sure, why not? I've certainly done it in the past. But accepting a salary lower that doesn't even cover your cost of living (as implied in the article), when joining a company that's reportedly taken $20M in venture capital... That seems pretty unreasonable. Even exploitative.

In case of people who don't have money. A lot of money means happiness.

And most of the times it is.

Not optimizing for money is setting yourself up for long term sadness. Though it might make you feel comfortable for the meanwhile.

Not optimizing for money is setting yourself up for long term sadness.

I'm not saying work for minimum wage. Money is obviously a component to happiness, because while you can't buy happiness, it's hard to be happy when you can't afford to eat. But you probably don't have to hit 100% of your maximum earning potential to avoid starvation-induced unhappiness, which is why optimizing for money is not my approach.

It's true that non-founder equity has a trivial chance of becoming life-changing money. But working at a fast-growing company has benefits. For inexperienced by ambitious people, the work-to-employee ratio makes it possible to take on projects that would normally go to someone more senior, prove your talent, learn quickly, and earn further options grants as a bonus. Even if you never get a windfall from that company, when you leave you'll have skipped a few years in job growth and be able to enter the next company in a better position.

To make a lot of money joining a startup, you probably have to be better at evaluating startups than VCs are, which is pretty difficult. Luckily, picking a startup where you can develop your skills, work with smart people, and have a lot of fun is easier than that. But it's still not automatic--you need to evaluate the founders and other employees to find out if you'll fit.

I don't know why you're posting the same advice that, apparently, you know gets circulated here continually. In this case the guy got the base employee package, and that money allowed him to build a company that's on a great path. If he had followed your advice who knows where he'd be.

    I don't know why you're post the same advice
    that, apparently, you know gets circulated
    here continually

Because prospective startup employees get dazzled by promises of riches that, if they were to stop and do some basic arithmetic, they would know are highly unlikely. I hope that if I beat this drum long enough, more people will hear it. All that said, I'm glad that things worked out for Cliff.

    If he had followed your advice who knows where he'd be.

He wouldn't have worked for "well below market rate" wages. That's for sure.

Also, it seems somewhat disingenuous, given this topic, that you don't mention you work for Greylock.

"somewhat disingenuous"

Well, that's a rather passive-aggressive way of saying nothing at all, but insinuating anything.

It's irrelevant is why, I do work for Greylock but I'm not advocating that people should work below market rates, or even saying your advice is universally wrong. I'm saying that you are posting this advice on a story which literally contradicts what you are saying. The "I left the money" story would have been a much more sensible place to leave your comment.

Speaking of arithmetic though:

He received 80% of a $300k payout over two years: $120/year. On top of that he received a salary of, maybe, $60-80k. I think he did fine, and has landed well

Your advice doesn't make sense for this story. It's like posting "and this is why I don't fly" on a story about an utterly mundane flight.

The $300K payout was not a foregone conclusion, in most cases, the bonus does not come through.

What I'm really interested in, is where you came up with that "Salary of $60-$80K" - what is that number supposed to represent? It certainly doesn't correlate with any engineering salary in the bay area I've seen in 15+ years. I.E. That isn't "below market salary" - it's what most companies pay their interns/summer students doing Desktop Support for IT the first couple years. ($65K is actually my very first salary in the Bay Area - doing Windows 95 Desktop suport back in 1996.)

I made $80k out of college, as did many of my peers -- $80-100 was the range. And most engineers I know are making approximately double that at the 3-5 year mark. $80k is absolutely below market for an engineer with more than a little experience -- I don't know about the pay ranges for desktop support techs.

Since you are working for Greylock, which is a VC, your are directly vested into clueless/naive programmers accepting below market offers, working long hours for a false promise. It is usually the VCs and founders that make the most out of a startup. Hence your advice is misleading at best.

Also, as an engineer I'd like to see this cycle stop. It creates an exploitative environment akin to some of the bad stories you hear in the gaming industry, where young engineers are often taken advantage and burnt out the industry.

Thank you for saying that. Much more nicer tone than I would have had.

If the story is about someone achieving a rare but desirable outcome, and there's a common perception that the outcome isn't rare, then it makes sense to post a comment like the GP's. It may help prevent availability-biased readers from improperly "confirming" their belief that the event is actually not rare.

According to linkedin, he worked at powerset for 3 years at "well below market rate". He got 240K in bonus money from the acquisition. So the question is, how far below market rate? If he was making 60-80K as you suggest, that's about 60-80K below market rate. Which would mean that he took a huge risk for very little actual gain, especially since the bonus was probably taxed as regular income rather than capital gains.

Part of that was sunk costs. Presumably he was gambling on Powerset being a much higher exit. This store and the "I left $300k for github" are two sides to the question of what do you do when you are facing a soft landing rather than launching into orbit.

If the bonus had come in the form of a more lucrative cash buyout, it likely would have ended up being short term capital gains as options were cashed out, so there isn't even a tax difference.

Cliff Moon's own post is pretty clear on this point: he wasn't impressed with the outcome of having worked at Powerset for below-market wages.

Really? At one point he says "it could not have worked out better for us" I'm not getting the sense that he was dissatisfied.

He lucked out. Which is the whole point. You don't hear about all the other people who got a small bonus and were kept on at roughly the same salary. It works out decent-to-great for founders, but employee #3-10 not so much.

Although I'd be interesting in knowing. Granted, most people probably consider a acqui-hire to Google or Facebook a great medium term career move.

When I read that in-context it seemed clear that the "us" in that sentence was Powerset. He said that at the time of the acquisition he wasn't even thinking about Boundary and he mentioned starting the company only in the next paragraph.

My impression is that people know they will get less money working at a startup than a big company (including the average payoff when things go really well).

They do it for the experience of working on something really new, and working in that kind of environment, not the money. The big tech companies try to be startup-like, but they can never truly emulate the startup experience.

I'm not sure this is true. There is lots of sage advice out there pointing out what seems obvious to older, more jaded folks, which is that unless you are an actual founder, you'll probably not make too much money even on a successful exit. The information is certainly out there. It is mentioned on HN a lot.

But on the inside of these places you tend to have a lot of people at the founder level who speak about how well off everyone is going to be when the business really hits it big, and this type of talk can be pervasive to the point of almost being cultish. It becomes the go-to pep talk when the going is tough -- "Sure we're working 90 hours a week, but just think how great it is going to be when we all have Lambos in the parking lot!" And I do think a lot of younger folks who are less experienced with the game do tend to believe the bullshit even if all available data (save for ridiculous outliers like Google) states otherwise. When you're inside an echo chamber, it is really hard not to start believing what everyone is echoing, even if it seems obviously wrong to objective bystanders.

As far as the founders go, I think in some cases they are just being purely manipulative, and in other cases they aren't but are just naive themselves and not really thinking about the enormous drop in EV you can expect when you are a common share pleb.

>I'm not sure this is true. There is lots of sage advice out there pointing out what seems obvious to older, more jaded folks, which is that unless you are an actual founder, you'll probably not make too much money even on a successful exit. The information is certainly out there. It is mentioned on HN a lot.

What are you disagreeing with? I said that people know that startups don't on average pay more than big companies.

Most people I know who have considered the start-up option want the start-up experience for its own sake, not because they expect big financial gains.

I am disagreeing with the idea that the rank and file (primarily young) employees really understand that they are almost certainly going to make less money than they would working at a big company.

Anecdotal evidence on both sides, but most people I know who have actually gone into very early stage contemporary startups as non-founders were convinced (primarily by being sweet-talked by the founders and money people) that the company they were working for was going to be "the next big thing", and that is already a bad assumption for any startup. But the worse misconception is that even if the startup defies the odds and is quite successful, most younger non-experienced folk remain under the impression that because they were given "1%" of the company to sign-up (at the time when they actually signed up), if the company exits at say $100,000,000 ("real" money but kind of chump change in the days of Instatumblrgram) they will see $1,000,000... which is... not going to happen, not even close. By the time they are fully vested and the company exits, their 1% is probably more like 0.01% or worse. The realities of things like dilution of common stock are obvious to people who live on the money side of the startup world, but not so obvious (in my anecdotal experience) to the heads-down techie types who haven't yet been burned by it.

I completely agree, but I want to add one caveat. People will often learn far more spending a year or two at a startup than they will at a big company. In the long run, that will often pay dividends once they get to a good big company.

That's a fair point. If you do choose to accept a salary reduction, do it for the right reasons, not because you're going to rolling in dough in two years after your SoLoMo startup IPOs.

Sorry for my naivete but what the range for founder-level equity?

YC chooses >=10%

Depends on the valuation of the co., number of founders, and how many rounds of investment they've done (every round dilutes things). Basically though, if you weren't there when the company was founded, you probably won't have it.

Assuming a YC 3 founder model After 1 or 2 seed rounds, likely 10-20% Decrease by 20-40% per round after

I'd expect the real founders to be in for no less than 1 / (num founders * 2). But in this context for taking a below market salary (as opposed to forgoing salary entirely), I think he's trying to convey >5%, as opposed to the standard SV lure of around 1-2% for an engineer they want to work for peanuts.

Now that I've said that, hopefully someone more knowledgeable will jump in to correct these numbers.

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